Slowdown challenges the steel tube, pipe industry

Members of the Association of Steel Tube and Pipe Manufacturers (ASTPM) have reported a definite slowdown in the sales of steel tubes and pipes in the third quarter of 2008, ASTPM executive director Mike Robertson tells Engineering News.

"Steel giant ArcelorMittal South Africa announced price drops for October, November and December, which is part of the reason for the slow down of orders received. Companies are reluctant to order and keep huge stockpiles in the face of further anticipated steel price drops," he says.

Besides the local price volatility, prices have dropped dramatically in the export market making the export of steel pipes and tubes difficult. A slowdown in overseas demand is challenging the security of orders for steel tube and pipe products, but it is expected that there will be an improvement in the first half of 2009, adds Robertson.

Meanwhile, the antidumping duty placed by the US on Chinese exports of circular welded carbon steel pipe in July last year and the recommended implementation of a 90% antidumping duty by the European Union is having an impact on exports from South Africa.

Further, a number of mining projects are being shelved as a result of the current economic downturn, affecting proposed orders from these projects.

"Other public infrastructure work is going ahead, with no reports of fall offs. This includes the 2010 stadiums and the Gautrain project, which do not seem to be affected by the global economic downturn," says Robertson.

Meanwhile, Robertson says that the domestic market sales for steel pipes and tubes, was relatively buoyant for the first six months of 2008. However, he notes that in the same period, the industry experienced a shortage of steel. He attributes this to factors such as ArcelorMittal South Africa's maintenance programme, and the 10% power cut that was imposed on the industry by State-utility Eskom, which negatively affected production.

"During this period, most members were working on an allocation basis, where it was impossible to commit to big, new orders. Lead times during this period were also longer, so that members who were trying to export steel pipes found it difficult to obtain a set price for steel.

Robertson comments that companies that are making larger diameter pipes, such as construction group Group Five Construction subsidiary, Group Five Pipe, and welded steel pipe manufacturer Hall Longmore, a Murray & Roberts company, have orders for water projects and the petroleum pipeline from Durban to Johannesburg. He adds that a lot of the steel for the petroleum pipelines is being imported, because the wide coil required for these larger diameter pipes is not available locally.

Higher Grade Steel Tests

The association has facilitated the testing of grade 355 megapascal (MPa) steel on structural hollow sections, following the international trend towards using higher-grade steels for construction work. The stronger steel would theoretically result in thinner, more lightweight sections for the same strength design requirements, with cost savings to the end-user. Currently, the steel grade is 300 MPa.

The first tests started at the beginning of October 2008.

Robertson says that association member companies have ordered standard grade 355 MPa steel and are conducting the manufacturing and mechanical properties tests on the standard 355 MPa steel. The steel might need to be modified to become more pipe-manufacture friendly and this would then become the industry standard.

Final results from these tests are expected during the second quarter of 2009.

Education, Skills and Training

Robertson says that the association had been involved in a number of initiatives to further skills training and qualifications in the pipes and tubes sector, such as the registration of unit standards for pipe making.

To grow and encourage the use of quality hollow structural sections in the construction and building industries, the association sponsored the Tubular Category award at the South African Institute of Steel Construction awards, which took place in September 2008.

An industry initiative in 2009 is an allied association to ASTPM, the Steel Tube Export Association, which is planning outward selling missions for its members, as well as members of other downstream associations, into Africa.

Future Trends

Robertson says that with the global recession, the next six months is going to be challenging for the association's members. "On the export side, the weakening rand should enable South Africa to export at competitive prices during this time. The general downturn on the international market though, will challenge the steel industry," he says.

Cheers my friends

Juha